Technology StocksSilicon Motion Inc. (SIMO)

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From: Elroy9/28/2017 12:21:21 AM
   of 1953
TrendForce Says NAND Flash Market to Regain Balance in 2018 with Annual Bit Supply Growing by 42.9%

This kind of news is great for SIMO. Hopefully it's starting now, and continues for the next 18-24 months, bringing a massive crash in NAND prices, and massive jump in NAND deployment EVERYWHERE, and everyone and anyone who invests in memory tech wants to be long SIMO (benefits from excess capacity) and short the NAND makers (suffer from NAND excess capacity).

Hopefully the one year drought on the SIMO share price is over.......

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From: Elroy10/5/2017 9:34:10 PM
   of 1953
SIMO will likely pre-announce revenues and gross margins Friday morning or Monday morning.

As a reminder the guidance from the Q2 call was for Q3 revenues to be between $122m and $129m, and Q3 gross margins to be between 44.9% and 46.9%.

Both of these numbers are expected to be low points in the cycle, and both should head up from here for the foreseeable future.

We shall see what happens, but if things just go according to expectations SIMO's long year of drought will hopefully come to an end, and we can see revenues, gross margins and share price appreciation return.

All the news about NAND supply in 2018 increasing sufficiently to meet demand is really good for SIMO. In general SIMO's products go into the lower mass market area of the NAND space. When NAND supply is tight (as in the past 4 quarters) the NAND makes dedicate most of their NAND product to their own high margin high end enterprise NAND products, and starve the low end where SIMO is involved. When NAND supply is excessive, all the module makers and cost sensitive product makers can get NAND, and those are the guys that use SIMO controllers. So......hopefully the NAND drought of the last 4 quarters turns into a NAND flood by next summer, and SIMO's revenues respond to the flood surge with their own surge.

But....anything can happen!

We still have the question of whether SK Hynix will go it alone in the transtion from eMMC (currently 100% sourcing controllers from SIMO) to UFS (no commitment to source anything from SIMO) in cell phone connectivity. And we hope SIMO still has Ali Baba as a customer for it's Shannon Enterprise SSDs, maybe Ali Baba has switched providers, who knows?

PC SSDs seem like a slam dunk to do well when NAND production ramps, SIMO has a diverse customer base in that area, but in the other two areas (cell phone eMMC/UFS controllers and Shannon enterprise SSDs) SIMO is highly dependent on ONE customer (Sk in eMMC/UFS and Ali Baba in Shannon), so we gotta hope the relationships with them stay strong.

And the interesting bit is SIMO's discussion of enterprise SSD controllers. They said they have two customers who will begin purchasing product in the latter half of 2017. I don't think the volumes are terribly large in enterprise SSD controllers, and two customers may not move the needle, but who knows? Hopefully enterprise SSD controllers is a new 4th area that grows steadily over time as merchant provider SIMO grabs share from internal controller groups. That's what happened in the client space, I don't see any reason why it won't happen in the enterprise space. SIMO will begin at the low end of the enterprise SSD market, make an inexpensive working product, and move up the technology stack. Hopefully!

And one last wildcard is the Chinese NAND makers. China has committed to entering the 3D NAND production, and I think they are expected to produce and ship 32 layer 3D NAND product that is ~2 years behind the current NAND makers. They will need controllers, SIMO is the logical place to get them. If China can produce 3D NAND, this could be a big story for SIMO in 2018 at some point. Even if the Chinese NAND makers are not profitable, they or their customers will need SIMO NAND controllers to make any final product.


If NAND production is going to ramp meaningfully in 2018, short the NAND makers and long SIMO is the way to invest in that trend. Hopefully institutional investors are reading this post!

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From: Elroy10/6/2017 12:17:35 PM
   of 1953
TAIPEI, Taiwan and MILPITAS, Calif., Oct. 06, 2017 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation ( SIMO) (“Silicon Motion” or the “Company”), a global leader in designing and marketing NAND flash controllers for solid state storage devices, announces that based on its preliminary third quarter financial results, revenue is expected to be within the upper half of the original guidance range of $122 million to $129 million that the company issued on August 1, 2017. Gross margin (non-GAAP) is expected to be near the midpoint of the company's original guidance range of 45.0% to 47.0%.

The Company will release its third quarter 2017 financial results after the market closes on October 26, 2017 and will host a conference call on October 27, at 8 am Eastern Time.

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From: Elroy10/6/2017 12:27:49 PM
   of 1953
There's nothing special in today's SIMO pre-announcement, but I think others are with me on the view that the just completed Q3 is the bottom for this part of the NAND memory cycle, and from here on out we're over the hill and starting to get production ramps which means controller and revenue ramps for SIMO.

Long SIMO and short the NAND makers seems a good position to be in for the next 12-24 months, we shall see...

SIMO train leaving the station....

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From: Elroy10/6/2017 11:08:12 PM
   of 1953
SIMO investors seem to like the idea that the fundamental low quarter may be in, and the future looks up from here. By how much, who knows, but if SIMO can just keep it's current design slots it seems like the last four quarters of headwind should turn into a nice tailwind for SIMO. The 2D to 3D NAND transition is at least a year on for most of the NAND makers, and they all should be ramping higher yield production with higher layer count 3D NAND for the next 18 months, and maybe more. And then we'll see if the Chinese will actually be able to make some NAND chips that they can sell, if so those new NAND chips need controllers.

SIMO announced a $200m share repurchase when they did their Q2 conference call at the end of July 2017. I wonder how much they've bought? Perhaps not much. SIMO was $41 when they made the Q2 announcement, lowered expectations for Q3, and announced the buy back. They probably expected the shares to decline due to the weak Q3 revenues guidance, but instead the shares went up to $44 the next day, hovered around $42.50 for a few weeks, and are now $51. They were probably thinking it would be a good idea to buy some stock in the $30's since they expect good things in 2018. It never got there. We'll see. They don't really need to buy shares to support the stock price since the stock has risen on it's own without any unexpected good news. I'd rather have them bump up the dividend than buy back shares if the stock is doing well on it's own without their buyback support. I want the dividend cash for myself!

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From: Elroy10/9/2017 8:20:12 PM
   of 1953
Last year in October.....

On October 24th SIMO announced an increase in it's quarterly dividend from 15 cents to 20 cents, for each of the next four quarters. Then they announced Q3 results on October 28th.

So.....we may get a dividend increase announcement around October 23rd.

I wonder what SIMO has done in regard to their $200 million share buyback announced about August 1st this year? They've had 2 months to buy back some stock, so if they are going to do it steadily with equal amounts purchased each month, they might have bought back up to $33 million of stock, about 800,000 shares.

But I recall a presentation they made in September at a conference, maybe the Citibank conference. They said that the trigger to buy back stock is near the 52 week low, and it hasn't been that low since the buyback announcement. Maybe they've bought back zero. I wouldn't mind, I'd rather have them increase the dividend than buy back shares. The shares are doing fine without them buying it back themselves, so let them hang on to their cash. If 2018 does have a revenue rebound as expected, I think they'll generate a ton of cash (probably more than $100 million) in the year. I'd love to see them bump the dividend up to 30 cents per Q, and say the share repurchase is still in place but they don't feel the need to buy back shares while the stock is doing a good job of going up in price on it's own.

It seems like SIMO has tailwinds on the horizon, now we just got to hope for no unexpected bad news. If things just go along normally, and SIMO keeps it's design slots it seems like it should just continue to float upward until the next downturn in NAND which is expected, I don't know, a few years from now.....

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From: Sultan10/10/2017 1:21:29 AM
   of 1953
Loop Capital Raises Silicon Motion Technology Corporation (SIMO) Price Target to $59.00

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From: Elroy10/11/2017 9:55:29 PM
   of 1953
SIMO short position declined from about 3.9 million shares on 9/15 to about 3.3 million shares on 9/30.

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From: Elroy10/14/2017 6:04:43 AM
   of 1953
Ali Baba is SIMO's main Shannon customer.....

Alibaba says it will invest more than $15 billion over three years in global research program

Alibaba announced it will invest more than $15 billion over the next three years in a global research and development program

As part of the program, Alibaba will set up research labs in China, the United States, Russia, Israel and Singapore

The labs will conduct research in areas such as data intelligence, Internet of Things, financial technology, quantum computing and human-machine interaction

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From: Elroy10/16/2017 7:41:27 AM
   of 1953
Toshiba reportedly suspends NAND flash production in Japan

Josephine Lien, Taipei; Jessie Shen, DIGITIMES [Monday 16 October 2017]

Toshiba recently suspended NAND flash production at its Japan facilities for a few weeks due to ransomware attacks on its computer network, according to sources at channel distributors. The incident could tighten global NAND flash supply.

Toshiba decided to shut down the production for 3-6 weeks to deal with the hacking, but production has now returned to normal, said the sources, adding that the suspension resulted in reduced NAND flash production nearly 100,000 wafers.

The world's NAND flash market was supposed to see improvements to the undersupply situation starting the fourth quarter, but the Toshiba fab shutdown has now created uncertainties, the sources indicated.

Demand for NAND flash chips has been driven by an increase in the average memory content in smartphones and server market growth, while growth in the supply has been constrained by chipmakers' slower-than-expected transition to 3D technology. The global supply of NAND flash memory fell short of demand in the latter half of 2016, and has remained tight since.

Nevertheless, end-market demand is actually not as strong as expected, and the NAND flash price rally has gone out of proportion, unable to reflect the real market demand, the sources said. Channel distributors have become reluctant to place orders as the consumption of end-market devices, such as SSDs, is being discouraged by their high prices. The price hikes already started to show adverse impact on demand at the end of the second quarter, the sources noted.

Many downstream distributors originally believed that NAND flash prices had been inflating excessively and would see correction starting the fourth quarter of 2017, according to the sources. However, with the Toshiba incident, such a price correction may not occur.

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